Your money script is a story you tell yourself about money. This story, the way you approach your finances, an outlook on a certain segment of your life, can have a significant effect on your behavior. In the growing field of financial psychology, the money script is a key element for clients and patients.

Financial psychology is not quite a mainstream field of psychology yet, nor is it an approach that financial advisers normally consider. For clients who work with financial psychologists, however, there is a clear benefit.

Addressing stress-related issues from a financial behavior angle has been shown to be effective. For those who undergo this type of counseling, psychological distress decreases. When the practitioner is trained, clients come away with a better psychological relationship to money. There is not yet an accreditation in this field, so there’s always a chance of finding a psychologist or financial adviser who isn’t qualified for this type of role.

Discussion about money scripts could be a good way to open a conversation between a financial psychologist and his or her client. These scripts are described in a recent New York Times article:

Brad Klontz, a financial psychologist in Hawaii and an associate professor at Kansas State, thought up the phrase. In his research, Mr. Klontz has found four basic scripts: money avoidance, money worship, money status and money vigilance. Each has its own complications.

People with money avoidance tried to distance themselves from money. The result was predictable: They undermined their financial well-being.

Those who worshiped money believed it would cure all their problems, if they only had more of it.

People with a money status script seemed similar to money worshipers, except they connected money to their sense of well-being. Or as Mr. Klontz put it, self-worth was linked to net worth.

The last script was money vigilance. These people did not flaunt what they had; they paid their debts on time and were generally cautious about overspending. If anything, they were the ones who could deprive themselves for no rational reason.

These money scripts are more insightful than the approach to money I’ve previously thought about. A “money mindset” theory evaluates how someone perceives the concept of money as a whole. Money can be good, money can be bad, money can be neutral.

Those who think money is good might prioritize financial gain at the expense other goals, while those who think money is bad may limit themselves from achieving financial success. These money scripts offer some nuance that could help get to the root of a psychological issue.

In my initial adult years, my money script was money avoidance. I became aware I was in financial trouble, but there seemed to be nothing I could do about it. I chose a career path that would make financial goals incredibly difficult, and I was having only moderate success with being a website developer and consultant in my limited spare time.

I literally avoided my finances all the time. I couldn’t pay my student loan bills. I couldn’t pay my speeding tickets. I tried to keep low balances on my credit cards, but I still needed to take out an expensive cash advance from a credit card a few times to pay my bills.

This was not a good space, and the more I ignored it, the more I avoided stress and distress.

At least for a time. The growing mess eventually collapsed, and my financial problems were now an acute situation that I needed to resolve through drastic measures.

Now, despite writing about finances for more than a decade, I still can’t say my relationship with money is one hundred percent healthy. My life and my financial approach and philosophies have improved a great deal. I worked hard to build some success for myself.

But I still struggle.

When I started getting my financial life into shape, I took some good advice, advice I share often. I started tracking everything I spent and everything I earned, entering every single transaction into a program that could let me take a snapshot of my financial condition at any instance.

The software helped me track my progress as I paid down my student loans, and as I saw my net worth increasing, month after month once I had a job whose salary covered my basic expenses, and year after year as I continued along a path of making good financial choices, I enjoyed seeing those exponentially growing bar charts.

So maybe there was a hint of the money status script as I gained some happiness from a growing net worth. I never thought thought that my increasing net worth was linked to an increasing self-value or value to society, but when my future started looking bright, when I thought that I had a chance to some day be financially independent and free to pursue my dreams without a burden, that positive attitude kept me motivated.

But today, theoretically financial independent, I still fret. Nothing is permanent. No success will last forever. I can’t help thinking sometimes that this is the best it will ever be for me. And when challenges arise, as one did as I was going through the process of selling my business, I get concerned that my success thus far, as modest as it is compared to others who have made a name for themselves in this business, makes me a target.

And now, going through a problem with my apartment wherein I may be only partially covered by insurance, and I may have to turn to the help of an attorney, the distress shows itself again.

Money vigilance is how I’d describe my money script, starting from the day I decided to get my finances in order, tracking nearly every cent, to today, when I’m trying to protect what I have for my future. But this is basically a self-diagnosis.

The availability of information makes self-diagnosis an interesting way to evaluate oneself and can occasionally lead to insight and an improved outlook on life. This just highlights the importance of seeing a professional who has the training to provide effective tools and mechanisms for dealing with psychological issues.

Between vigilance and stress, I haven’t really had a chance to enjoy my success thus far in life. Once I get through my current problems, I need to focus more on this aspect of my life.

Seeing a financial psychologist would be a good idea for me — and failing that, going back to seeing a standard psychologist could help me as well. When I was going through the sale of my business and was dealing with stressful litigation, I started seeing a psychologist to deal with some of the stress and my irrational thoughts.

It was a helpful experience, and I would have continued the therapy longer if my health insurance provider didn’t change. My psychologist was not covered by the new insurance plan, but others were. It’s a poor excuse for stopping therapy, but at the time, the acute condition had ended and I felt prepared to move on.

Each of these money scripts can result in harmful financial behavior. And at least three of the four have applied to me in various ways throughout my adult life.

Do any of the four money scripts describe you? And would you seek professional guidance from a financial psychologist?

How does financial psychology fit in with an overall financial plan or an overall approach to personal health?

Your credit report is like a financial passport. If it’s clean you’ll find the doors to the financial world wide open. Your credit journey will be carefree and wonderful. But if you have blotches on your record, the credit border control is going to make it difficult and expensive for you to go anywhere.

You probably already know this. But what you may not know is that your credit report may contain significant errors. According to the most recent Federal Trade Commission study [pdf], more than 20% of all credit reports do. And if you are that 1 in 5 person who has a botched credit report, it means that you could be penalized for something you didn’t even do.

To make matters worse, once you identify credit report errors, it can be difficult to correct them. That’s because the main players (credit bureaus and creditors) don’t like to be bothered. Fortunately, there are three tools you can use to get these organizations to clean up their sloppy work. Let’s jump right into it:

1. Blaze your own path.

There is a well-defined route to clean up credit report errors but you should not follow it blindly. The process the credit bureau suggest is to inform them of the problem first. Supposedly, the bureau will then work with the creditor to fix the problem.

In theory, this sounds great but in practice this fails miserably. Here’s why. Once you dispute an item on your credit report to the credit bureau, they are only required to ask the creditor to verify the charge and they have 30 days to do it. As long as the creditor comes back to the credit bureau and tells them the charge is correct, the bureau has complied with the law.

From their standpoint, the case is closed. This is great for the clerks who work at the credit bureaus -– they get to go back to their donuts and coffee. You on the other hand are still left holding the bag –- and paying the price.

As a result of this ineffective loop, many people just give up trying to correct credit report errors. It’s understandable; people just get tired of the run around. But you don’t have to put up with being led on a wild goose chase and you don’t have to give up either.

Instead, you should simultaneously contact the creditor and the bureau to demand the false negative item be removed. Dispute the negative credit item with both parties at once rather than waste time with the bureau before contacting your creditor.

While just about everything you read tells you to go through the bureau first, there is absolutely no reason for doing so. If you go directly to the creditor you can force them to prove your dispute is wrong. You don’t have the kind of firepower with the bureau friend.

2. Exercise your legal rights.

By law, all negative items must be verifiable, accurate and complete. If they fail any of these tests, the bureau must remove them. Despite this being the law, many bureaus simply don’t comply. So the best way to force them to play by the rules is to let them know you’ve read the rule book.

There are four main laws that protect consumers from having bogus information reported on their credit reports. These are Fair Credit Reporting Act, Fair Credit Billing Act, Truth in Lending Act and the Fair Debt Collection Practices Act. These laws are written in straight-forward language and they are pretty easy to understand. It’s in your interest to spend 10 minutes and familiarize yourself with these laws. That’s all it will take.

In summary, these regulations require the credit bureaus and creditors to investigate if you dispute a negative item on your credit report. If these organizations still believe the negative information is correct, they have to send you proof if you request it. These laws spell out other protections and rights you have as a consumer. My suggestion is to familiarize yourself with these stipulations and reference them when you contact the bureau and creditors. This will let them know they are dealing with a serious person.

3. Sue the creditor.

If a creditor won’t ask the bureau to remove an item that by all rights should be removed, don’t hesitate to sue them in small claims court. This is an easy and inexpensive process for you but a complete pain in the rear for the creditors. Perfect.

You see, in most states, lawyers aren’t allowed in small claims court and that means you have the advantage. All you have to do is follow the small claims court process carefully and have the right people served at the creditor’s business.

In many cases, this alone will bring them to their senses. It’s usually not worth the creditor’s trouble to go to court so this move usually wakes them up.

The credit repair process is skewed in favor of the credit bureaus and creditors. But you can disrupt their advantage and get mistakes wiped off your credit report by going directly to creditors simultaneously, reading up on the laws which protect consumers and suing the creditor to force them to do the right thing.

Have you ever been frustrated by the process of fixing credit report errors? What was your experience?

This is a terrible question, and it usually begets a terrible answer. It’s a question that motivational speakers use to encourage people to make sure they’re optimizing their ability to earn an income. There’s nothing wrong with that per se, but it leads to some poor conclusions.

For instance, if someone earns a salary that works out to $2,000 a week and works 40 hours a week, the immediate conclusion could be that this worker’s time is worth $50 an hour. It’s a simple way of looking at a financial equation and neglects to incorporate important aspects of compensation like benefits and job security, but it’s usually the baseline that employees use when trying to determine how much money their time is worth.

Calculations like these lead to bad conclusions. You might avoid certain tasks, like household cleaning, because the task isn’t worth your time and you could hire someone to do the same work for less money. Your hourly rate for work may be $50, but that doesn’t mean that all your time is worth the same amount.

In my first main job out of college, I was working for a nonprofit with a salary of about $2,700. It worked out to about $550 per week, or $11 an hour. But wait — I actually worked closer to 80 hours a week most of the year, so the value of my time, using this calculation, would have been $5.50 an hour. The minimum wage in New Jersey at the time was $5.15.

For an Associate Director of a far-reaching program with a lot of responsibility, that’s probably not a fair rate of compensation. But I believed in the organization’s mission — and prior to being an employee, I was an unpaid intern with the same organization, and I wouldn’t believe that the value of the value of my time was $0.

Unpaid internships are like slave labor. Even though there are strict rules that govern whether an unpaid internship is legal, there’s a fine line, and companies seem to have a lot of leeway. Unpaid internships are practically necessary in some fields, taking the place of entry-level jobs, and this is especially true in nonprofit.

(That’s why I’m in the process of establishing a small stipend at my undergraduate alma mater for students in the arts who need an internship to complete their degree. Not all students are able to spend a semester or summer working for free.)

But once you’re established in a field, there should be no reason you are expected to work for free.

This is true for employees. Business owners, on the other hand, have a different approach to compensation for time and effort.

After I started Consumerism Commentary, I began working really hard to build this website from the ground up. I usually worked about eight hours a day, writing, conducting research, building some of the technology, communicating with colleagues, and eventually dealing with advertising clients.

For a long time, there was no money involved. I was essentially working for free, but I was doing something I really enjoy: building a fantastic community of people interested in personal finance. It didn’t feel like work, even though I spent more time and effort on the project that I put into my day job.

I eventually realized that I was building something, something of value. And that helped me focus on growth and working hard even when I started to make some of those calculations. When advertising revenue from the website was approaching $2,000, I started to see major potential, but I was still concerned. Even working 40 hours a week to build the site (in addition to 40 hours at my day job), the work I was doing was “worth” only about $11 an hour.

But I was creating an asset. I was creating an asset that had an important feature: cash-flow. I was building something in my own name, something I could own. I was working for a what was effectively a small wage, but it had the potential of paying off for me in the long-run.

When you work for a small wage for an employer, the only way to use that to build something for the future is if the low-paying job helps you move forward in your career. There are no guarantees that will be the case. And there are no guarantees that spending a lot of time working for yourself will result in something of value, but chances seem to be better. You have more control over your destiny.

In the nonprofit world, privileged employees, those who retired from a lucrative career and don’t really need the income or those who come from wealthy families and are supported by their wealth instead of working, ruin the industry for everyone else. If nonprofits can keep finding people who don’t need money to work practically for free, those of us who want to work in that industry but need to make a living will never be able to find good work.

There’s a lot of correlation between nonprofit work and early work at a tech start-up. Usually, the company’s leader, with a vision, encourages people to take a chance on an emerging business, and those at the beginning of a budding company are highly motivated and generally don’t care too much about salary. Again, that’s really only possible with a good amount of privilege or a willingness to live in a slum.

But there’s a key difference. When you join a start-up at that point, there’s usually a promise of later compensation. Early employees are often given equity, which encourages workers to increase the value of their equity by doing fantastic work for making the business an early success. A bootstrapped company has not a lot of cash from profits to work with, so equity is a way to fairly compensate employees.

The picture changes abruptly when that start-up receives capital, whether from angel investors, venture capital firms, or an initial public offering on a stock exchange. That equity now has some real value, and the company now has cash. And when attitudes at that company don’t change inline with their multimillion dollar funding, it creates a significant conflict, especially when the company prefers to partner with individuals through good will rather than compensation.

Here’s when it makes sense to work for free, whether you’re an employee, self-employed, or a business owner.

Work for free as an intern if it’s the only option you have for getting into the field you want and it will lead directly to a paid job. It’s usually not the only option, and many times interns are turned away when their trial period is over. If there are so many people who want to work for a company or an industry that they’re able to take advantage of a large number of interns, the benefits of being in that field better be worthwhile, and they better be almost guaranteed to those who survive.

Work for free if you’re building your own asset that will provide you a good life in the future. There are no absolute guarantees, but this is the kind of free work that has the best chance of really paying off. Your working for free, but the work you’re doing directly benefits you.

Work for free if you want to help an emerging company whose mission you believe in. But don’t continue working for free once the company can afford to pay you for your work. And this doesn’t include working for free as an employee, where you should be compensated always, at least with equity.

If you are a freelancer or a consultant, you can build some relationships by working for free, but only if that leads to something of value once the work you do contributes to the company’s success.

Work for free if you can afford it and the work gives your life meaning. If you don’t need to earn money from how you spend the bulk of your time awake, then why bother pursuing compensation? If you can spend your time doing work for something meaningful and something that you enjoy while still meeting or exceeding all your financial goals, the added stress of a job — of working for money — seems unnecessary.

Have you ever worked for free? What did you see as the benefits? Do you regret it, or would you do it again? Has working for free ever paid off in the long run for you?

Over the last year, a friend of mine has been trying to convince me to move my financial assets.

I currently have a taxable investment account at Vanguard, and my portfolio consists of a mix that includes a domestic stock index fund, an international stock index fund, and tax-advantaged municipal bond funds. This friend believes that I should be approaching my investments somewhat differently.

He is a real estate broker, so he likes to think in terms of leverage. My asset level qualifies me for so-called “private banking” at most retail banks, and one of the things banks like to do for wealthier clients is hold onto their assets while offering special terms like reduced banking fees and great interest rates on a substantial line of credit.

I’ve had no need for such things thus far, but there may come a time where I want to use leverage to invest in a business, so I’ve been exploring the idea.

So far, I’ve talked to two firms. The first was the one recommended by my friend, as he manages the assets of his wife, who is a member of a prominent family that has seen success through generations in New Jersey. That’s Merrill Lynch. The other is a branch of my local retail bank, Wells Fargo Advisors.

I spoke to both separately, and they both put together proposals. Wells Fargo presented me with a team of people ready to take over my banking, while the Merrill Lynch adviser initially thought my plan was solid. Both parties drew up a proposal for me, and the two were very different. I had a much longer initial discussion with Wells Fargo, so their proposal took into account my preference for low-cost index funds, at least partly.

Neither of these teams of advisers are financial planners. They are salespeople, or stockbrokers, or financial advisers, or investment advisers, and they have products to offer. People in these roles can go by any variety of names and can be misleading to customers.

The price I pay for these products, in addition to the fees baked into investments that eat into net investment results, is generally a 1% fee for assets they manage. There are certain times when paying 1% of a portfolio’s balance every year — whether the portfolio gains or loses money — could be like paying someone’s salary. It’s far higher than the expense ratios embedded into my mutual funds.

In theory, even salespeople, whether they earn money from commissions, from kickbacks from fund managers, or from a combination of the two, should want to offer what’s in the best interest of the client. If they don’t, the client would leave, theoretically, and find a better salesperson. But I’m not so sure this theory works out in practice. Given two roughly similar investments, wouldn’t a salesperson want to offer the one that provides him with a little more income?

Legally, advisers must only sell investments that are appropriate for the investor based on the customer’s time horizon and risk tolerance. A financial planner, particularly one who is certified, is held to a different standard. A financial planner must give advice always with the customer’s interest in mind. That’s the fiduciary standard, and it would be the difference between a planner recommending a low-cost portfolio of index funds and an adviser or salesperson making decisions based on what’s more lucrative for the firm.

President Obama wants to change the regulations so all financial advisers, everyone who works for a bank and offers advice on investment decisions, are held to this fiduciary standard. This probably has more of an effect on what happens when you call up your employer’s 401(k) plan sponsor to ask for investment advice.

It’s clear why banks have no interest in adhering to a fiduciary standard. If stockbrokers were unable to sell all but the lowest-cost investments, it would change the entire nature of Wall Street. In order to stay in business, managers of active mutual funds would need to find a new way to sell their products. Banks would have to make up the income previously generated through incentives or kickbacks in other ways.

This is why the industry has reacted to the fiduciary standard proposal by claiming that the requested regulation would make it more difficult for the middle class to get financial advice. I don’t necessarily think that’s true. It might make investment sales at a bank less accessible to those without sufficient assets for the 1% fee to generate worthwhile revenue.

But that’s not the financial advice most people should be seeking — and I found that out when I attempted it myself. The middle class, whoever that may be — the not wealthy, who may be dealing with a growing retirement investment account, a house, and maybe some additional taxable investments — needs little in the way of investment sales and more in the way of basic financial planning advice. Maybe financial coaching.

Maybe there’s a different solution. More retail banks could offer financial planning or coaching, where the employees abide by the fiduciary standard, much like independent Certified Financial Planners. The model must work because Vanguard offers this service to its customers; there’s no reason why retail banks can’t figure out how to make sure the same type of service would be profitable.

If customers really believe the best place to go for financial advice is their local retail banks, those institutions can do a better job of meeting those needs rather than just putting them in front of salespeople. If financial planners can stay in business independently, banks should be able to find a way to incorporate that type of service into their offerings.

Employers may want to follow this example, as well. When I worked for a financial company, a company whose own subsidiary managed employee’s 401(k) accounts, employees were encouraged to talk to a company-provided financial expert. It was never clear — especially to me, thirteen years ago, before I knew about fiduciary standards and financial planners — who I was talking to or how they determined their recommendations and advice.

When you walk into a car dealership, you know you’re talking to a salesperson, and you know the goal of the salesperson is to sell you something. You also know that the salesperson has incentives to sell you cars, related products, and services that generate the most profit for the dealership.

For most customers, this isn’t as clear when you enter a retail bank. For some reason, customers believe that bank employees want to help and are financial experts who offer advice. The proposal of new fiduciary standard regulations could make sure that customers can walk into a bank and get the real advice they’re seeking.

The fiduciary standard isn’t a guarantee. As Walter Updegrave pointed out in a recent article for Money, an adviser and a client can never have completely aligned motivations. A financial planner would need to give advice that is in the best interest of his or her client, but must also be concerned about earning future business from each client, winning new clients, and staying in business.

No one, not even a fiduciary, can look out for yourself better than you.

And I understand that the general reaction to that fact is that we need to educate everyone more about managing their own finances, so they know to avoid brokers who try to sell customers what’s in the company’s best interest instead of what’s best for the clients. But this is a message that doesn’t get through completely, and especially not to the people who need to message the most.

Financial planners and coaches can keep trying to make it clear that they’re better resources for most people and we can continue pushing useless and harmful money management and financial literacy classes in high school, or we can make some industry changes to ensure that the professionals people are most likely to encounter when they need help are the right type of financial planners.

I’m going to go back to the bank. I may eventually move my assets to the bank to take advantage of access to credit, but only if I can do so on my own terms, investing how I want to invest, with no additional fees.

Do you think all brokers and financial advisers should be held to a fiduciary standard?

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About Luke Landes

Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke has contributed to PC World Magazine, US News, Forbes, and other publications. Read more about Luke and about Consumerism Commentary.

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